Aestar – Why pay state transfer recordation tax to give children houses?

Aestar LLC supervises the sale transactions, verifies legal documents, and insures real estate rights.

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Transferring property such as purchasing real estate generally incurs Maryland transfer recordation tax. Some transfer of property may be exempt from certain taxes. For example, if a parent gives (i.e. transfers) a home, free of debt, to the child, the gift is exempt from the state transfer recordation tax. However, if a parent refinances a home to increase the unpaid principal balance and adds the child’s name to the deed at the settlement, the parent’s giving without receiving cash is still subject to state transfer recordation tax. This is because the child takes over and becomes obligated for the increased principal balance, new money, of the mortgage; the child is in fact “buying” the home for the amount of the new money. In this situation, the transfer (giving) has “consideration,” and thus is subject to Maryland transfer recordation tax of the new money.

Contact me should you have further questions.

Flora Kan, Licensed Title Producer/Notary Public
Aestar Settlements LLC
15881-B Crabbs Branch Way, Rockville, MD 20855
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This column is not legal advice and should not be acted upon without obtaining your own legal counsel.
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Jonathan D. Kan, ESQ. is admitted to practice before the Court of Appeals of Maryland in 2017. Mr. Kan graduated as a Juris Doctor of University of Baltimore School of Law, Maryland, in 2017, concentrating on criminal, trust and estate, and real estate laws. Mr. Kan has published the Aestar Blog since 2015. He co-founded Aestar LLC in 2013. Mr. Kan has been a licensed title producer, settlement agent, and notary public serving the Maryland and Virginia states since 2013.

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